All eyes are on the next move by the Reserve Bank of India (RBI) after the Delhi High Court (HC) on Friday rejected its intervention application in the $1.18-billion Tata Sons-NTT DoCoMo arbitration enforcement proceedings. The HC judgment, which decided to uphold the settlement agreement between the two firms after dismissing the RBI’s vehement objections to the enforcement of the award has divided arbitration experts on what legal remedies remain for the banking regulator.
Opinions are divided on the approach the RBI might undertake if it chooses to appeal against the verdict, which may have severe ramifications on the sanctity of the regulatory and foreign exchange policy of the country. Making the issue more critical, is the fact that the written judgment of the court fails to mention that the decision will not be precedent for future cases — something that was mentioned by the court in oral proceedings.
The enforcement proceedings being a commercial dispute under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, have sparked the debate as to whether the RBI can approach a division bench of the HC to seek an appropriate remedy or if the only remedy that remains is a special leave petition (SLP) in the Supreme Court.
While the discretion of the apex court to entertain an SLP is unfettered by any other law, there exists no remedy that allows an appeal from a judgment enforcing an international arbitration award in such a case under the Arbitration and Conciliation Act, 1996. “Section 50 of the Arbitration Act only allows an appeal where the court has refused to enforce a foreign arbitration award. No appeal would lie under this provision if the award has been enforced. The options for the RBI to appeal are limited to a SLP in the Supreme Court,” says Tejas Karia, partner, Shardul Amarchand Mangaldas.
As the judgment comes from a Commercial Division of the Delhi HC under Section 10 of the Commercial Courts Act, the question remains whether an appeal from a decree of the court can be appealed to a division bench of the HC. Under Section 13 of the Commercial Courts Act, any person aggrieved by any decree of a Commercial Division can appeal to the Commercial Appellate Division of the same court. Since final decisions of an arbitration court are deemed to be decrees for the purpose of enforcement of an international arbitration award (Section 49 of the Arbitration Act), the question remains if this decision can be appealed to a two-judge bench of the HC.
Sitesh Mukherjee, partner, Trilegal, says the RBI will be able to appeal to the division bench of the HC. Whether or not the Commercial Appellate Division will entertain the move since the regulator is an intervenor is a separate matter, notes Mukherjee. To rationalise these contrasting opinions, Gourab Banerji, arbitration expert and senior advocate, says there is a divide between high courts — Delhi HC and Bombay HC — on the issue as to whether an appeal lies to the Commercial Appellate Division in arbitration matters. The former has said that an appeal from an arbitration case can only be entertained if the Arbitration Act allows it, while the latter has taken a more liberal view considering of the wording of Section 13 of the Commercial Courts Act.
Wherever an appeal may lie, it will be up to that court to decide whether an intervention by a regulator on the critical concern of violations of banking and foreign exchange provisions on grounds of upholding fundamental policy of the country, must be entertained even at the stage of enforcement of a foreign arbitration award.
If not, there lies the prospect of this decision becoming a strong persuasive force against the sanctity of RBI regulations in the face of a contrary international award in our fast evolving international corporate arena for days to come.